Now The Hard Part Begins

By Steve Smith -- TWICE, 8/4/2008

It only took 412 days, but the Federal Communications Commission (FCC) finally came to a decision and approved the merger between Sirius and XM.

That it was approved at all is a minor miracle in itself. Remember the clamor last year from Capitol Hill and the National Association of Broadcasters (NAB) when the merger was proposed? It sounded like someone had proposed a merger of all the oil companies into one. (Didn't that happen already? No ... I'm thinking of the Exxon Mobile merger, which took less time to approve than this deal.)

News of the FCC OK came forth on a Friday evening in mid-July after a week of leaks to a variety of media outlets about which FCC commissioner was voting, what he or she wanted in terms of concessions, etc. I guess the FCC wanted to soften the blow to opponents of the deal.

Credit goes to Sirius XM Radio president Mel Karmazin and all those with both former companies who fought the well-entrenched lobbyists and Congressional sympathizers in D.C. and got the merger approved.

Technically, some say the new company is a monopoly, but I agree with the argument that broadcast radio, HD Radio, Internet radio, online downloads and the rest are satellite radio's competitors.

In some ways the merger was the easy part. The FCC, in a nod to the merger's detractors, put in a few conditions that could stifle satellite radio's growth. The FCC wants to extend a price freeze on subscriptions, they want interoperable radios available in nine months vs. the year originally suggested by Sirius, and they may want HD Radio included in new hardware.

Yes, the FCC says that within 30 days of adopting the merger order it will gather information on whether HD Radio should be a feature in all satellite radios.

Why would a consumer want or need HD Radio in their new satellite radio receiver if they are already paying a subscription for satellite service? The inclusion of HD Radio can only increase hardware costs, for no discernable reason.

But for the new company the merger enables it to cut costs just about across the board and enable Sirius XM Radio to focus on their business — delivering the best possible radio experience — to the their customers.

And I agree with those who think the future is bright for the new company. I've spoken with plenty of friends, family and business associates over the past couple of years who have subscribed either Sirius or XM. To a man (and woman), they would never go back to today's homogenized broadcast radio programming, which is probably what the broadcasters have feared all along.

For consumers, who have been interested in satellite radio, the merger should give them confidence that satellite radio is here to stay. Retailers, who have seen their sales slump while the FCC deliberated, have to hope sales will perk up for the second half and this year's holiday season.

The old saying goes that you should be careful what you wish for. The stockholders and execs at Sirius XM Radio got their wish. Now the hard part begins. They have to turn a profit, never the easiest thing to do in the CE industry.